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Most States Have Now Acted on Conforming to Federal Suspension of Moving Expense Deduction/Exclusion-An Update

With recent actions by the states of Arizona and Minnesota to conform their state taxes to the federal Tax Cuts and Jobs Act (TCJA) enacted at the end of 2017, almost all states have now acted.  Most have adopted the federal suspension of the moving expense deduction/exclusion, but a few states remain in which employer payments for moving expenses are excludable. 

Of the states with an income tax, about half automatically adopt all federal tax changes, and must act legislatively to reject any or all of them.  These states are commonly called “rolling” conformity states.  The other half, commonly called “static” conformity states, have laws under which their tax code conforms to the federal code as of a specific date, which must be changed by new legislation to adopt federal changes.  Three states either do not conform, or only conform selectively, and must also formally act to adopt any federal changes.

Despite the TCJA becoming effective for 2018, many of the static states were slow to act (note references to Arizona and Minnesota above).  One (Virginia) changed its mind.  And several have done nothing.

Worldwide ERC® has followed these developments regularly to keep its members up to date (see, for example, updates posted in May and September of 2018). With few states expected to do anything any time soon, here is a current scorecard:

Static Conformity States

Sixteen states have conformed to the disallowance of the moving expense deduction/exclusion: 

  • Arizona
  • Georgia
  • Idaho
  • Indiana
  • Iowa (effective for 2019; allows exclusion in 2018)
  • Kentucky
  • Maine
  • Minnesota
  • North Carolina
  • Ohio
  • Oregon
  • South Carolina
  • Vermont
  • Virginia (originally decoupled, but reversed course late in 2018)
  • West Virginia
  • Wisconsin

One static state acted to allow an exclusion:

  • Hawaii

Three static states haven’t changed their law, exclusion still allowed:

  • Arkansas
  • California (has enacted limited conformity legislation that does not include moving expenses)
  • Massachusetts (State legislature has not acted, but state revenue department has issued Technical Information Release TIR 18-14 announcing that state will not conform to the federal moving expense changes)

Rolling Conformity States

Eighteen rolling conformity states in which exclusion is currently not allowable:

  • Alabama
  • Colorado
  • Connecticut
  • District of Columbia
  • Delaware
  • Illinois
  • Kansas
  • Louisiana
  • Maryland
  • Michigan
  • Missouri
  • Montana
  • Nebraska
  • New Mexico
  • North Dakota
  • Oklahoma
  • Rhode Island
  • Utah

One rolling conformity state has kept the exclusion:

  • New York

Non-conformity States

Two allow exclusion:

  • New Jersey
  • Pennsylvania

One does not allow exclusion:

  • Mississippi

The Final Score

Aggregating the data above, as of the date of this report the following seven states continue to allow a deduction/exclusion for moving expenses in 2019:

  • Arkansas
  • California
  • Hawaii
  • Massachusetts
  • New Jersey
  • New York
  • Pennsylvania

How This Impacts Mobility

Companies must make decisions as to whether to gross up for state taxes in states that no longer allow an exclusion for payments or reimbursements of moving expenses.  The data in this article will assist companies to determine the states in which gross-up is not currently necessary, with a resulting savings in relocation dollars.

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